The deteriorating relationship between China and Australia may see their political wrangling extend from trade wars to threatening to have an adverse effect on other sectors including the budding blockchain-based collaboration between entities on both sides.

Firms from various countries have been working together using blockchain technology. But not many of them have seen entities from two countries work directly to record major initiatives from both sides in the blockchain space like it’s been seen with China and Australia.

Late last year, the China, Australia and Japan operations of one of the ‘Big Four’ firms, KPMG, launched a blockchain-based product to improve transparency in the trade sector and add value to its service offering starting in the Asian axis including China. KPMG Origins‘ blockchain-based “track and trace” platform supports industries including agriculture, resources, manufacturing and financial services.

Members of the new Asia Pacific Provenance Council also chose to use the technology to improve the efficiency of supply chains which export $76 bln worth of Australian agricultural surplus to China every year.

This month, the largest steelmaker in China, Baowu and Australia’s BHP Group announced the completion of their first iron ore trade as part of the effort to improve efficiency in mining and metals supply chains and to bring more trust to the management and trading of natural resources.

As a state-owned iron and steel company headquartered in Shanghai, Baowu’s identification with the blockchain technology is quite understandable as it is in line with the Chinese government’s resolve to take advantage of the emerging technology as “a core technological breakthrough” which has prompted national action toward blockchain-related innovation in the past year.

China is Australia’s biggest trading partner with a share in the value of exports to China reaching a record 38% or $117 bln in 2019. However, following a diplomatic spat whose effect is likely to spread into various parts of both economies, there is a propensity for ongoing blockchain initiatives that crosses the border to be put on hold if not halted completely. The disruption would be as a result of the culmination of a steady decline in the two countries’ relationship for at least the last five years. China had earlier dealt two devastating blows to Australia’s beef and barley industries, imposing tariffs that hurt the two-way trade between the two countries which was worth around US$161 bln between July 2018 and June 2019.

Fast forward to the Hong Kong protests against China which started last year as protesters took to the streets to demand democratic freedom, tension reached a tipping point this week as the Chinese parliament adopted the dreaded security law that was proposed in response to the protests. The fear of Beijing’s clamp down on protesters that could be caught in the web of the new law caused the likes of the United Kingdom to offer Hong Kongers who wish to leave the city a safe haven. Australia has just announced it is considering the same and China is not taking it lightly.

With China now warning Australia against its attempt to make the offer, the looming exchange to this effect will likely lead to a more rigorous conflict that has the potential to shut the door on blockchain innovation or impede its growth not just for a while but permanently.